Distributing earnings

And it is for that reason that it is the single most important factor that needs to be sorted out immediately. There is no one golden solution to the myriad options that present themselves in this area, but here are some of the common challenges, and recommended courses of action that are most likely to keep everyone happy and the band together.

 

Total share

 

Under this kind of agreement, the members agree that all money that the band earns is paid directly to the members immediately. Thus the members become responsible for their own transport costs, equipment maintenance and upkeep, as well as their own costs for accommodation, food etc. This is often the best solution when you are a new band that has yet to make a reputation for itself and your members likely have day jobs to keep them going. Despite the fact that they then become responsible for all their own costs, many members prefer the idea that they are making at least some money from every gig.

 

Share after cost

 

Under this model the band agrees that certain costs will be paid for by the band before any money is shared. This model is popular for musicians who make more of their living through music and would like to see their playing overheads reduced. For example, the band may undertake to pay for rehearsal space, strings and skins, and petrol money. What remains is paid out equally amongst the members. This has the advantage that each band member is at least getting some cash out for shows, while making sure that the cost of being in the group is kept down.

 

Reinvestment

 

Many bands with long-term plans will initially go this route. Under the investment agreement, all monies that the band makes are ploughed back into the band. Under this agreement, all equipment, travel, gig and accommodation costs are paid for by the band and no cash is paid out at all. Extra cash is then used to manufacture merchandise, pay for touring or recording time etc., depending on what is on your agenda. This means that, while you take no money out for the effort of songwriting and playing, the band is increasing its potential to earn all the time. The general recommendation is to use this model for a finite period of time only, before starting to pay members directly.

 

Earnings split

 

This is the model that many bands follow once they have established themselves. It is a good model because it balances the need of members to earn money from the band with the need to continually reinvest in equipment, merchandise and recording. There are many variations under this model, for example:

 

 

A 50-50 split

 

Fifty percent of all money earned goes back into the bank account. Fifty percent is split between the band members.

 

Equal member split

 

The band is counted as an extra member. So if you are a three-piece, all cash is split four ways; if you are a fourpiece it is split five ways and so on. In other words, the band account gets the same amount of cash as each member does.

 

Bear in mind that you will always need money in the band account to pay for various things and that by taking all cash out of the band all the time, you are committing to paying for these things out of your own pockets. Also remember that there are various revenue streams that the band can earn from: make sure that everyone understands the splits on all these streams. For example a band can earn from door takings or fees for live performances, merchandise sales, album sales, appearance fees, royalties from sales and sponsorship deals. Your agreement needs to cover all these options to prevent disagreements later.

 

Next week: Money issues

 

Originally published in David Chislett's One, Two, One, Two: A Step By Step Guide To The South African Music Industry. Download a free copy of the book at www.davidchislett.co.za.